Mortgage Rates Hold Ground Near 3-Month Highs

30 Year Fixed

4.63%    +0.00

15 Year Fixed

3.64%    +0.00

10YR Treasury

3.00%    +0.0076

FNMA 30YR 3.5

99.39    +0.02

FNMA 15YR 2.5

102.05    +0.06

Mortgage Rates Hold Ground Near 3-Month Highs
January 3, 2014
Market Summary

Mortgage rates technically ended the week in slightly better shape than last Friday’s rates.  The difference was almost negligible, however, equating to 0.02% in terms of rate and leaving rates very close to 3-month highs.

4.625% remains the most prevalently quoted 30yr Fixed, Conforming rate for ideal scenarios (best-execution).

Although the holidays are officially behind us, the bond markets that underpin mortgage rate movement managed to remain in “holiday mode.”  Part of this has to do with the fact that this week still contained a day and a half of down time for bond markets, but a blizzard in New York certainly didn’t encourage traders to be in the office.

This time around, light holiday activity didn’t result in any extreme volatility for interest rates, as it sometimes can.  Although we shouldn’t necessarily expect excessive movement in either direction, the level of activity should pick up next week.  More traders will be back from vacations (forced or otherwise) and important data will require more attention, especially Friday’s Employment Situation Report.  The implication of increased activity is more potential movement in rates, for better or worse.

Matthew Graham, Chief Operating Officer, Mortgage News Daily

30 Year Fixed Rate Mortgage

Week in Review
Rates shown below are based on the 30 Year Fixed Rate Mortgage
Beginning Average: 4.65%
Ending Average: 4.63%
Weekly Change: -0.02%
Yearly Change: +1.17%
Friday, December 27, 2013  :   4.65% (-0.01%)

Mortgage rates recovered modestly in most cases, falling just below the highest levels in more than 3 months. As has been the case for the entire week, the bond markets that underlie mortgage rate movement were exceptionally quiet.  There haven’t been any significant developments for them to react to, and market participation is too low to muster much of a reaction anyway.

As such, we’ve simply been drifting in the direction of the last hard push Back in early November.  Unfortunately that “push” was in a moderately higher direction.  The pace has been fairly gentle compared to what we endured this summer, but even though the interest rates being quoted aren’t rising as quickly, the closing costs associated with those rates have been drifting higher and higher.

Monday, December 30, 2013  :   4.62% (-0.03%)

Mortgage rates continued lower to begin the week after pulling back just slightly from 3-month highs on Friday.   Activity continues to be subdued in the financial markets that underlie the day to day movement on lenders’s rate sheets, making day-to-day changes less a factor of the day’s events and more to do with random chance.

 

In addition to that randomness, there’s certainly been default momentum leading higher in rates.  In general, that momentum has now led rates back to longer-term highs seen in August and September right as the year draws to a close.  While this isn’t an environment where you’d want to plan on falling rates, the way that we’ve hit recent highs presents the first opportunity to see a pocket of improvement within the longer-term trend higher.

Tuesday, December 31, 2013  :   4.63% (+0.01%)

Mortgage rates were little-changed today, ending the year less than a quarter of a percentage point away from their highest levels in more than 2 years.  4.625% remains the most prevalently quoted rate for ideal, conforming 30yr Fixed loans  (best-execution), with the only changes being seen in the form of closing costs.

On average, rates were an eighth of a percentage point higher on several occasions in August and September this year.  Before that, we’d have to go back to April 2011 to see higher.

Despite the steep rise in rates in 2013, the average rate for the entire year (4.25%) is the second lowest on record next to 2012’s 3.75%.  The previous 3 years were each roughly 0.25% higher and 2008 was roughly a full 1.0% higher than that.  To make this easier to digest, here’s a quick recap of that info:

Thursday, January 2, 2014  :   4.63% (+0.00%)

Mortgage rates were almost perfectly flat today.  Various lenders were in slightly better or worse shape, but on average, today’s quotes will look very similar to Tuesday’s.  That means 4.625% remains the most prevalently quoted rate for ideal, conforming 30yr Fixed loans  (best-execution), with the minimal changes coming in the form of closing costs.

The financial markets that underlie mortgage rate movement managed a slightly more active day with the arrival of the new year, but things won’t be close to normal until next week.  That means rates are currently being decided with fewer than the normal amount of votes.  When the majority returns next week, it could result in more pronounced movement.

Friday, January 3, 2014  :   4.63% (+0.00%)

Mortgage rates were even more unchanged today than yesterday.  Not only was the average rate among various lenders unchanged, but individual lenders all stayed closer to the yesterday’s rate sheets, whereas some were a bit higher or lower yesterday.

That said, the flatness was only accomplished after some mid-day price changes when improving market conditions allowed lenders to release better rate sheets.  Before that, the day’s average would have been slightly higher.  4.625% remains the most prevalently quoted rate for ideal, conforming 30yr Fixed loans  (best-execution).

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Today’s Rates
Best Execution
Rate Change
30 Yr FRM 4.63% +0.00
15 Yr FRM 3.64% +0.00
FHA 30 Year Fixed 4.25% +0.00
Jumbo 30 Year Fixed 4.55% +0.00
5/1 Yr ARM 3.25% +0.00
Average Mortgage Rates
Rate Points Change
FHFA *
15 Yr. Fixed 3.62% 1.06 +0.18
30 Yr. Fixed 4.49% 1.21 +0.22
MBA **
30 Yr. Fixed 4.64% 0.41 +0.02
15 Yr. Fixed 3.74% 0.29 +0.08
30 Yr. Jumbo 4.63% 0.24 +0.02
30 Yr. FHA 4.29% 0.24 +0.04
5/1 ARM 3.26% 0.39 +0.06
Freddie Mac **
30 Yr. Fixed 4.53% 0.80 +0.05
15 Yr. Fixed 3.55% 0.70 +0.03
1 Yr. ARM 2.56% 0.50 +0.00
5/1 Yr. ARM 3.05% 0.40 +0.05
* FHFA averages are updated monthly.
** Mortgage Bankers Association (each Wednesday) and Freddie Mac (each Thursday) averages are updated weekly.
Secondary Markets
MBS
Price Change
30YR FNMA 3.0 94.97 +0.03
30YR FNMA 3.5 99.39 +0.02
30YR GNMA 3.0 96.47 -0.02
30YR GNMA 3.5 100.77 0.00
15YR FNMA 3.0 102.05 +0.06
15YR FNMA 2.5 98.94 +0.02
Treasuries
Yield Change
2 YR 0.4004% +0.0164
5 YR 1.7333% +0.0119
10 YR 2.9985% +0.0076
30 YR 3.9276% +0.0046
Prices as of: 1/3/2014 4:30PM EST
MBS and Treasury data provided by Thomson Reuters.
Mortgage News Daily and MBS Live! are exclusive re-distributors of Real Time Thomson Reuters Mortgage Information.
Secondary Marketing Managers:
If you are interested in gaining access to the most accurate real-time back-month TBA indications from Thomson Reuters and Tradeweb. Request More Information
About This Report

Mortgage News Daily is a trusted source of mortgage rate market data and analysis, with over 1 million readers each month.

Our Daily Rate Report is the most accurate and timely report of its kind, factoring in actual rate sheet data from top lenders combined with reports from our community of originators on how they’re generating quotes based on TODAY’S rate sheets.

 

Mortgage Rates Run to 3-Month Highs Complicated by Fee Hikes.

 

Mortgage Rates Run to 3-Month Highs Complicated by Fee Hikes

Dec 19 2013, 4:09PM

Mortgage rates continued higher today, reaching levels not seen since the week before the FOMC Announcement in September.  Today’s weakness owes itself completely to yesterday’s news.  While the Fed’s decision to “taper” didn’t cause an excessive move higher yesterday, it did confirm the significant move higher that began in May.

While we’re not moving higher at the same pace seen in May and June of this year, the determination is as high as ever.  In a real sense, the pace of the movement–in general–and the mass behind it, are glacial.

Against the backdrop of that overall gradual move higher, we have had, and will have our ups and downs.  Some days will be flat.  Some days we’ll improve or deteriorate modestly, other days a lot.  Today was a bit more than modest for most lenders, though some borrowers will only experience it in terms of closing costs.

That means that 4.625% remains intact as the most prevalently quoted rate for ideal, conforming 30yr Fixed scenarios  (best-execution), but that it will be more expensive to obtain than it was yesterday.  4.75% is creeping up quickly.

If it seems like rates have been slow to move up recently despite talk of “higher rates,” it’s because the gap between rates (usually 1/8th or .125% increments) has gotten increasingly expensive in terms of PRICE (related in terms of percentage of the loan amount such as 0.75 = $750 on a $100,000 loan).

In the past, when we’ve discussed “affordable buydowns,” that might look like .4 to .5 in terms of upfront cost to move between rates (i.e. paying to move an eighth lower in rate, or being charged less to move an eighth higher in rate).  Those same costs are now closer to 1.0, meaning that it costs more to buy down to the next lower rate, but that there is also better insulation from being pushed up to the next eighth higher in rate or better compensation in terms of decreased closing costs if you do move to the next higher rate.

So will rates continue to go higher?  Remember the glacial pace with ups and downs.  There will always be pockets of correction and consolidation even within broad trends higher.  The entire month of October was a great example.  Whether or not we’ll see another extended period of time like that in the near future is uncertain, but less likely than it was for two reasons.

First, the tapering corner has been turned.  Even though markets will continue to speculate about whether or not each upcoming Fed Announcement will result in another $10bln reduction in bond buying, the biggest speculation as to whether or not the process will start, is in the books.  Some have suggested that this calms volatility, and that may well be true, but it was volatility working in our favor that allowed October’s little bounce back to happen.

The other incredibly important factor is the recently announced increases to the Guarantee Fee imposed by Fannie and Freddie’s conservator the FHFA.  This will raise rates by .25-.375% for many borrowers by the time the up-front cost changes are applied, and that’s happening a lot sooner than most people realize.

In fact, at least one big bank has already applied part of the G-fee change to rate locks of 60 days.  It instantly made those locks way more expensive than they were yesterday.  Borrowers would either pay for it by moving up to the next eighth of a percent higher in rate, or by raising their up-front costs by around three quarters of a point (so $1500 on a $200k loan). If 60 day locks just took the hit, it will be 2 weeks or less before it affects 45 day locks.  Time is ticking…

Not only does this put a big consideration on the horizon, but it also means that lenders aren’t going to be too eager to put out lower rates between now and then because it’s unprofitable and unwise for them to get locked into earning interest rates that aren’t in line with the rest of the market in a few weeks’ time.

 

Loan Originator Perspectives

 

“The same song and dance continues. Matthew Graham equated the recent trend in rates this morning to “glacial momentum higher in rates.” I think this is a perfect analogy. It will take something big to break up the glacier slowly moving down the hill (or up in rates) at this point. I still think locking at or shortly after application is the best move for the foreseeable future.” –Stephen Chizmadia, Mortgage Advisor, American Capital Home Loans

“More deterioration in MBS markets today as bond investors pondered the short and long ramifications of yesterday’s Fed tapering announcement. As noted repeatedly, we’re in a rising rate environment, even before new pricing adjustments from Fannie and Freddie kick in over the next couple of months. Mid-upper 4’s may not seem like exceptionally appealing rates now, but rest assured in a few months we may be wishing they were still available.” –Ted Rood, Senior Originator, Wintrust Mortgage

“The tourniquet seems to be applied stopping the slow bleed to weaker levels. Would be nice if the worst is behind after the first taper announcement, but that is wishful thinking. Floating in hopes of a meaningful drop is asking for pain in my opinion. ” –Mike Owens, VP of Mortgage Lending Guaranteed Rate, Inc.

 

Today’s Best-Execution Rates

  • 30YR FIXED – 4.625%
  • FHA/VA – 4.25%
  • 15 YEAR FIXED –  3.5%
  • 5 YEAR ARMS –  3.0-3.50% depending on the lender


Ongoing Lock/Float Considerations

  • The prospect of the Fed reducing its asset purchases weighed heavy on interest rates for the 2nd half of 2013, causing volatility and generally pervasive upward movement.
  • Tapering ultimately happened on December 18th, 2013.  Markets had done so much to come to terms with it ahead of time that it essentially just confirmed the the 6 month move higher in rates, but didn’t make for another immediate spike higher.
  • That said, we should assume that we’re still in a rising rate environment on average.
  • NOTE: Lenders will be adjust rate sheets at various times in December and January to account for the most recent hike in Guarantee Fees.  This will unequivocally raise rates by at least an eighth of a percent for almost every borrower, and in most cases .25-.375%.  Depending on the lender, those changes will take place overnight and have already begun.
  • (As always, please keep in mind that our Best-Execution rate always pertains to a completely ideal scenario.  There are many reasons a quoted rate may differ from our average rates, and in those cases, assuming you’re following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).